John Paulson (right) and Harvard President Drew Faust greet Harvard Business School Dean Nitin Nohria. (Credit: Rose Lincoln/Harvard Staff Photographer)

Does $400M Gift to Harvard Support a Worthy Cause?

Harvard University recently made an historic announcement: billionaire hedge fund manager John Paulson gave $400 million to his alma mater’s School of Engineering and Applied Sciences. It marks the biggest gift to the world’s richest university, and some critics are pouncing on Paulson’s choice of a worthy cause.

“Giving to Harvard is not philanthropy,” Dylan Matthews writes on VOX.com. “It’s not helping people who need help, and it’s obscene that Paulson is getting a massive tax write-off for it. Giving to Harvard is not an act of altruism. It’s a gigantic, immoral waste of money, and it’s long past time we started treating it as such.”

Signing ceremony with John Paulson and Harvard President Drew Faust marking celebration of Harvard's largest gift. (Credit: Rose Lincoln/Harvard)

The signing ceremony with John Paulson and Harvard President Drew Faust marks the celebration of Harvard’s largest gift. (Credit: Rose Lincoln/Harvard)

But Paulson’s hedge fund colleagues defend him. Daniel Loeb from Third Point LLC tells Business Insider, “Would they criticize him if he just sat on his wealth and ‘compounded it’ like certain others? It’s a fabulous and impactful gift to a great institution. It will lead to discovery, life-saving innovation in biomedical engineering, opportunity, job growth and increased competitiveness in the United States.”

This debate over Paulson’s gift touches on vital issues in philanthropy today: How do you do the most good with your dollars? Who decides? Should the potential impact of large donations be scrutinized and debated? Or should we all just be thankful Paulson is parting with $400 million at all?

For our latest podcast, we asked a few thoughtful people around the world to weigh in:

“I think there’s no question that that money could have done a lot more good elsewhere,” Jon Behar tells Tiny Spark from Seattle. He’s Chief Operating Officer and Director of Philanthropy Education at the nonprofit The Life You Can Save. Behar explains his objection to the gift: “Partially it has to do with how much money Harvard already has; how much money they would have been able to raise even if Paulson hadn’t given that gift; and the (philanthropic) opportunities Paulson passed up in order to give this gift.”

Jon Behar (Courtesy of Jon Behar)

The Life You Can Save COO Jon Behar (Courtesy of Jon Behar)

Behar also used to work in the hedge fund industry. He concedes that wealthy individuals walk a public relations tightrope after giving away large sums of their personal wealth. “The impression that a lot of the hedge fund community probably has is, ‘Well you just can’t win. If you keep the money, you get blamed. If you give it away, you get blamed.'”

Behar says he would have advised Paulson to look at the vast body of existing research about what makes your donation most useful to the most people. It’s an idea known as effective altruism and is at the heart of Behar’s nonprofit.

We also spoke to Caroline Fiennes, who directs the nonprofit Giving Evidence and previously appeared on this program to discuss the need for nonprofits to collect better data. Speaking from London, she says she’s happy that there’s any debate at all about Paulson’s donation. “I’ve been in this game for 15 years in philanthropy, and this is the first discussion I ever remember about the effectiveness of a mega gift.”

Fiennes says public reactions to Paulson’s gift have mostly been from “rich white men” and not from poor people worldwide. “I dare say if you go out into the villages of northern Ghana and say, ‘Hey, we’ve got $400 million. Where do you think is the best place to put it?’ I kind of doubt many people would have voted for Harvard.”

Caroline Fiennes (Courtesy of Giving Evidence)

Caroline Fiennes (Courtesy of Giving Evidence)

But what about Harvard’s alums, who are doing good around the world and have benefited from the university’s generous scholarship programs?

We reached Kathy Ku in Seguku, Uganda. She received a full scholarship to study engineering and molecular/cellular biology at Harvard. The university also gave her a grant to teach in Uganda, plus seed money to start SPOUTS of Water, which locally manufactures water filters at an affordable price.

“I’ve had classmates go into similar paths, and without donors like Paulson that made it possible to travel to Uganda the summer after my freshman year, I wouldn’t have known that these opportunities existed, or that I could choose a career path like this one,” Ku tells us.

Kathy Ku (third from left) and her team standing in front of the first SPOUTS factory in Kumi, Uganda. (Courtesy of Kathy Ku)

Kathy Ku (third from left) and her team in front of the first SPOUTS factory in Kumi, Uganda. (Courtesy of Kathy Ku)

She also believes that Paulson’s money will go beyond its direct impact on Harvard’s School of Engineering and Applied Sciences. “That idea is to impact students, and to allow students to travel around the world, and see the world beyond their borders and try to put their engineering skills to use.”

What do you think of Paulson’s gift? Is it a good use of $400 million? A bad one? Or nobody’s business but the donor’s?


Additional Resources

Caroline Fiennes’ op-ed in Alliance Magazine: A welcome public row about donor effectiveness

Chronicle of Philanthropy: Harvard Gets Its Largest Donation Ever: $400 Million for Engineering

Inside Higher Ed: Does Harvard Need Your Money?

VOX: For the love of God, rich people, stop giving Harvard money

Business Insider: Hedge fund managers unload on Malcolm Gladwell after he trashes John Paulson

Featured Image: John Paulson (right) and Harvard President Drew Faust greet Harvard Business School Dean Nitin Nohria. (Credit: Rose Lincoln/Harvard Staff Photographer)

3 Comments

  1. Per Milam

    I enjoy Tiny Spark a lot and think it provides a good service. However, I was very disappointed in this interview, especially the lack of background brought to the discussion and the kinds of challenges Ms. Costello. Both critics of the massive gift point out that the absence of the gift might not have had any impact at all on the ability of people like Kathy to attend Harvard and gain its advantages. A discussion of universities that provide free tuition notes that, “Due to the Harvard Financial Aid initiative, parents with an income below $60,000 are not expected to contribute to college costs. Home equity and retirement accounts are not considered resources in determining family contribution. Financial aid packages do not include loans.” This has been true for many years and it applies to all poor and many middle class families in the United States. It is not cynical at all to think that the money would have done more good elsewhere than at Harvard. The strongest argument in favor of giving to Harvard instead of combating extreme poverty is that it will allow graduates to combat extreme poverty. But if that’s the argument, then surely it’s silly to give to Harvard rather than simply to fight extreme poverty. Giving to Harvard delays the beneficial effects and creates an expensive middleman between the gift and its effect. For example, if we think people like Kathy are important–which I do–why not give some of that money to provide capital for Kathy’s interesting project in Uganda?! And if we think her project is important enough to offer as a reason for giving to Harvard–which I do–why not consider other projects that are just as effective or even many times more effective? And let’s not forget that poor and middle class families are already given free tuition by Harvard and have been for years.

    • Thanks for your comment Per! I definitely agree with your arguments. One of the most important issues you raise is the structural fundraising advantages that Harvard has over organizations that focus on helping the world’s poorest populations such as Kathy’s Spouts project in Uganda or The Life You Can Save’s recommended charities. Besides already having an enormous (~$35 billion) endowment managed by world-class investors, Harvard also enjoys what amounts to an ideal fundraising position: global name recognition, a built in donor base (alumni), and widely-accepted practices that further these advantages (e.g. publishing lists of alumni who give to create social pressure, the legacy system, etc.) Charities serving the global poor enjoy none of these benefits, though each of us can help improve the situation by proactively identifying and supporting organizations that will do the most good with our gifts.

    • Amy

      Thank you for this thoughtful critique, Per. I’m left feeling unsure, however, exactly what disappointed you with respect to the interview? I sense that you wanted me to come out with stronger arguments against the Harvard gift? If so, I left that to my guests who have devoted their careers to exploring these issues. As host, I attempt to foster an environment where civilized debate is welcome. We cover a lot of complex issues on Tiny Spark. So when guests express a certain viewpoint, I try to challenge them with other points of view. In this way, we hopefully arrive at a deeper understanding of how complicated it is to “do good” and, ideally, we get one step closer to learning how to move forward more effectively. Your comments have added even more depth and nuance to the Harvard debate. For that, I am grateful. As always, I welcome any additional thoughts you have as to how you think our programming can be strengthened and I appreciate that you remain engaged in these important issues.

      Respectfully,

      Amy

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